What Happened?
Shares of sporting goods retailer Academy Sports & Outdoor (NASDAQ: ASO) fell 8.5% in the afternoon session after the company reported second-quarter results that missed analyst expectations for both profit and sales.
The company posted quarterly adjusted earnings of $1.94 per share, falling short of the consensus estimate of $2.13. Revenue for the quarter came in at $1.6 billion, slightly below the expected $1.61 billion. While total sales grew 3.3% year-over-year and same-store sales were flat, a notable improvement from recent declines, these points were overshadowed by weakening profitability. The company's operating margin contracted to 10.8% from 12.3% in the same period last year. Despite the misses, management raised its full-year guidance for both revenue and earnings, but this failed to reassure investors, who reacted to the weaker-than-expected quarterly performance.
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What Is The Market Telling Us
Academy Sports’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 19 days ago when the stock dropped 3.1% on the news that a hotter-than-expected wholesale inflation report fueled concerns about slowing consumer spending. The market was rattled by a Labor Department report showing the Producer Price Index (PPI), a measure of wholesale inflation, jumped 0.9% in July, significantly exceeding economists' expectations of a 0.2% rise. This was the largest monthly increase since March 2022, reigniting worries that businesses will be forced to pass higher costs on to consumers, who are already showing signs of price sensitivity. This inflation data has fanned concerns that U.S. tariffs on imported goods could start to translate into higher prices for shoppers. The inflation report landed amid growing evidence of consumer caution, with recent reports highlighting that shoppers are cutting back on non-essential spending, seeking out sales, and trading down to cheaper brands.
Academy Sports is down 13.3% since the beginning of the year, and at $49.03 per share, it is trading 21.9% below its 52-week high of $62.75 from September 2024. Investors who bought $1,000 worth of Academy Sports’s shares at the IPO in October 2020 would now be looking at an investment worth $3,774.
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